The question whether environmental groups should be registered as charities came up during the last federal election in 2015 and has now become the subject of conversation between Finance Minister Bill Morneau and some of Canada’s highest-profile environmentalists. It is an issue that could set the tone of relationships between industry and environmentalists for several years to come. Morneau indicated to the environmentalists that he was not much interested in implementing the promise made in the Liberal election platform.
Many environmental groups point to the Harper government as the origin of the challenge to their charitable status. It is certainly true that during that period several dozen environmental groups with charitable status were audited by the Canada Revenue Agency, with the apparent objective of determining whether they were too heavily engaged in political activities. Some of those audits are continuing today.
Although the Harper government is widely blamed for initiating this activity, it is nothing new. When I was executive director of Pollution Probe in the 1980s, we were audited twice in eight years for essentially the same reason. Fortunately, no effort was made at that time to revoke Pollution Probe’s charitable status, though Greenpeace Canada did lose its status.
The question whether organizations that advocate for or against government policies qualify to be recognized as charities is a complex one. Pro-industry organizations — such as C.D. Howe Institute, which aims to improve Canadians’ standard of living by fostering sound economic and social policy, The Macdonald-Laurier Institute, and Fraser Institute — are recognized as charities even though they seem to campaign for or against government policies as much as many environmental groups.
Similarly, many organizations that focus on social issues, such as Mothers Against Drunk Driving, are registered charities. The primary benefit to an organization of being a registered charity is being able to issue receipts that donors can use on their income tax returns. The law limits registered charities to spending no more than 10% of their revenue on activities that are political in nature.
While being able to give charitable receipts for donations is one of the fundraising tools of activist environmental groups, such as those that oppose pipelines and resource developments, tax receiptable donations are not a major part of the revenue of such environmental groups. Charitable status is more important to environmental groups that undertake activities such as publishing educational materials or participating in environmental assessment proceedings. This is because many donor organizations, foundations, trusts, and corporations are limited by their charters or corporate structure to giving grants only to recipient organizations that are registered charities. This is not necessarily a government restriction but may be a policy decision by the founders or boards of these organizations.
Consequently, while it might feel good to the executives of companies and organizations that encourage the government to get tough on activist groups that are registered charities, the loss of charitable status is unlikely to put an activist environmental group out of business. In fact, the reverse may be true.
The loss of status gives a group the opportunity to paint its business adversaries and the federal government in a bad light. That is good for fundraising! It is presumably also why the federal Liberal Party promised to stop the political activity audits of environmental groups during the last election campaign in 2015. Not only are political activity audits of environmental groups bad for the social license under which many industries operate, but they also worsen relations between environmental groups and industry.
Being a registered charity imposes some discipline on an environmental group. It must publish its annual financial statements, the remuneration paid, abide at least to some extent by the limitations on political activity, and generally comply with the restrictions on its activities laid out in its charitable application. An environmental group that is not a registered charity is not held to such standards and may engage more freely in behaviour that is disruptive to its adversaries.
Negotiating with a structured environmental group is almost always much easier than dealing with an assembly of unhappy, unruly, and hostile citizens. While the company may not always win, at least it will know with whom it is dealing. Business may well be in a better position if all activist environmental groups were to become registered charities than if all of them were to become an amorphous crowd.
Colin Isaacs is a scientist and analyst with CIAL Group who focuses on sustainable development for business. He has been involved in undertaking and reviewing a number of LCA studies. He can be reached at (416) 410-0432 (phone); (416) 362-5231 (fax); and firstname.lastname@example.org (e-mail).